Add co-working giant WeWork Cos. to the growing list of players looking to profit from Toronto’s booming office market.
The New York-based company aims to occupy at least 20 different locations in Toronto by 2020, up from three now, Dave McLaughlin, general manager for the Northeast at WeWork said in a phone interview last week. WeWork opened its first locations in the city last year, both of which were 98 percent occupied within the first month. A third location was announced in January.
“The bottom line is, we don’t see any limit to demand,” McLaughlin said. “We’re definitely setting our sights high for the city and we think it is an amazing ecosystem for business.”
SoftBank Group Corp.-backed WeWork is among the richest private technology companies in the world, with about US$4.75 billion in funding. The company has profited off a global shift toward shared offices amid more contract and freelance work, growing to about 230 locations globally in eight years. In Canada, the startup has leased seven buildings in Vancouver, Montreal and Toronto, where office vacancy rates are among the lowest in North America.
WeWork’s appeals include everything from craft beer on tap to apps that connect its tenants, who the company refers to as members. Artwork in its first co-working space in Toronto includes a Drake-inspired neon praying-hand sign with the number six beside it. The piece marks the entrance to the sixth floor -- and is a nod to Toronto’s 416 area code that the singer, one of the city’s biggest boosters, often references.
While these might be considered perks that would draw hip millennials, WeWork’s members include not just entrepreneurs but also big firms such as Royal Bank of Canada, Shopify Inc. and Equifax Inc that may be looking for temporary or spill-over space.
“Part of what we sell, and part of what’s so inspiring for people is the sense that they like coming in to work,” McLaughlin said. “That’s hard to capture, but it’s real and it’s essential to what we do and why people love what we do.”
WeWork charges an average of C$1,000 ($777) per month for one-seat offices in Toronto compared with $700 to $1,000 in Manhattan, while desks in Toronto can go for C$450 to C$700.
WeWork plans to open two more locations in the city in 2018, recently announcing 1 University Ave in the downtown core for a total of about 3,200 desks in the city. “The demand for that location has been really strong, and we’re seeing people already signing up,” McLaughlin said.
CBRE Group Inc. sees the technology industry, already a key driver of the market, soaking up an even larger share of space in the future.
WeWork usually partners with office landlords for leases of about 15 years. It’s also begun to purchase buildings. Its affiliate, WeWork Property Advisors, bought Lord & Taylor’s iconic building in Manhattan from Hudson’s Bay Co. last year for $850 million. As part of the deal, WeWork Cos. will also lease some space in Hudson’s Bay department stores in Canada, including its flagship store on Toronto’s Queen Street.
While WeWork has no specific targets in Toronto, acquisitions are a possibility in the future, said McLaughlin.
“I can feel the energy and potential and activity that’s going on there. It feels so dynamic and alive,” McLaughlin said.